Feeling the crunch: Mountain BizWorks tackles funding crisis

Struggling to address an increased demand for services amid a funding crunch, Mountain BizWorks is conducting “an intensive review of our programs and finances,” board Chair Eileen McMinn reports. Most of the organization’s existing training programs will be phased out by the middle of next year. The downsized local nonprofit will focus its remaining resources on lending.

Throughout its 24 years, Mountain BizWorks has nurtured Asheville’s now thriving entrepreneurial scene, providing loans and training to help people start and grow small businesses. But the departure of CEO Shaw Canale, who stepped down Nov. 12 after four years on the job, created a leadership vacuum — and raised questions about how the influential organization might change in response to current challenges.

Board members and staff have formed committees and task forces to take stock of the situation and plot a way forward, notes McMinn. In addition to slashing educational programs, they will cut staff positions. And they don’t plan to hire another CEO, McMinn reports.

A contributing factor in both Canale’s departure and the internal crisis was the organization’s failure to obtain a million-dollar federal Community Development Financial Institutions Fund grant it was counting on. Canale declined to comment on the situation, except to say she plans to move back to the Pacific Northwest with her family (she was previously CEO of the Cascadia Revolving Fund in Seattle).

The grant, which would have been spread out over three years, would have gone a long way toward funding Mountain BizWorks’ services. Last year, the organization’s expenses totaled $1.59 million. The group has been awarded similar grants in the past, says McMinn, but with its assets now topping the $5 million threshold for the first time, Mountain BizWorks had to compete with a different group of applicants.

“It’s like we went from the bush leagues to the majors and didn’t quite make it,” McMinn explains. “We didn’t think we would necessarily get everything we asked for. But we didn’t get anything we asked for.”

Rising demand

Meanwhile, the organization’s loans to local businesses have been on the rise. In 2010, Mountain BizWorks made 43 loans totaling $609,379, according to Development and Communications Coordinator Anna Raddatz. By 2012, that number had jumped to 61 loans totaling more than $1.5 million. And this year, the nonprofit is on pace to make 75 loans totaling $1.7 million.

The nonprofit had revenues of roughly $1.84 million in 2011 and $1.29 million last year, according to its website.

Mountain BizWorks’ classes, trainings and other support services for entrepreneurs have also been growing in popularity.

“Everything’s up: The loans that we’ve been giving out have been increasing,” says McMinn. “As a matter of fact, I might even say that we’ve been going a little bit too fast in some areas, and … some of what we need to do is slow down a little bit. And maybe it’s time for us to sit back and evaluate our capabilities.”

She says that she hopes A-B Tech, SCORE and other local organizations will be able to provide the types of training programs Mountain Bizworks is eliminating.

“We deeply regret having to lay off staff and eliminate programs, but we feel confident that this new structure will allow Mountain BizWorks to preserve its legacy,” she adds. “We are focusing our limited resources on what small businesses need most: lending.”

Broader impact

The new direction Mountain BizWorks is charting may have a significant long-term impact on the local economy.

“If you look around Asheville, they’re the reason that Asheville is a dynamic hub for independent businesses,” proclaims Lauren Patton, who opened the ZaPow! pop-culture gallery with her husband two years ago. Without the training and loan from Mountain BizWorks, she says, the business wouldn’t have opened.

“In the lending environment at the time, [traditional banks] weren’t even giving loans to conventional businesses with proven money streams. Whereas we were a total startup, trying to do something entirely new, and [Mountain BizWorks] was like, ‘Yeah, we believe in you: Let’s do it!’”

The roster of successful enterprises Mountain BizWorks has helped fund or train over the years includes LaZoom Tours, The Organic Mechanic, FLS Energy and the French Broad Chocolate Lounge, among many others.

Meherwan Irani, who co-owns MG Road with his wife, says a $50,000 loan from Mountain BizWorks was key to opening the busy bar last year.

“It was a very easy process. What I like about them, rather than a traditional bank, is they seem genuinely invested and interested in trying to help local, community-based small businesses,” Irani explains. Noting that the nonprofit turned down a 2009 loan request for Chai Pani, the couple’s other business, he points out: “They still have guidelines for who they can lend to. And the ideas have to make sense. They do try to secure their collateral to secure their loans. But I think they’re a great place to start. If something were to happen to them, I think it would be a loss to the community.”

For her part, Patton believes Mountain BizWorks’ current plight might even lead to improvements. “Changing or cutting things doesn’t mean they won’t grow into something else later — maybe something even more dynamic and interesting,” she points out.

Meanwhile, McMinn says that in addition to ongoing efforts to form partnerships with investors, the nonprofit is weighing other options for getting people involved.

“Support from the public is something that we certainly value,” she notes, adding that in the days ahead, residents “can keep their eyes open, and we’ll have a way for them to help.”